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John F | On a short-sale, can a bank make a counter-offer higher than the listing price? |
Two months ago, we put in an offer on a house. Details (using made-up numbers):
Last sale price: $300,000
Listing price: $200,000
Our offer: $210,000 (there were other offers)
We heard last week that our offer has gone through "negotiation" and was just waiting for the board to review it. Just today, we heard back. The bank made a counter-offer of $250,000 -- $40,000 more than our offer, and $50,000 more than the listing price!
This seems like it's at least unethical if not illegal. Can a bank actually make a counter higher than the listing price? Especially this far into the process? |
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Paul in San Diego
 |
Welcome to the wonderful world of Short Sales!
Here's what's going on: An owner informs their lender that they have some hardship (lost a job or whatever - and "I owe $300K and the property is only worth $200K now" is not a hardship). They are then instructed to submit a hardship package and put the house up for sale at market rates. When the offer comes in, the bank then goes through negotiations with all other lienholders (2nd mortgage, tax lien, etc.) as to who would get what from the sales proceeds.
If the lender and lienholders can't resolve the distribution of funds, because there's not enough to go around, the lender rejects the offer or counter-offers. And, it's a perfectly legal move.
Note on the seller's listing that it says something like, "Offers accepted pending lender approval of short sale." That's how they cover themselves in case the initial asking price isn't acceptable to the lienholders.
Actually, I think it's stupid. Figure out a price and approve the short sale. Then put the property on the market.
I've been looking for foreclosures over the last couple months and my agent won't go near short sales. Not only for the reason you bring up, but because very few selling agents have any experience with short sales. And, with so many distressed properties out there, the banks are up to their ears in work. So, even if the bank does approve an offer, you can end up in escrow for months waiting for everything to go through. |
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Landlord
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Sure they can. They never pre-approved the list price. The seller could have listed it for $1, that does not mean the bank will agree to sell it for that.
You are not anywhere in the process, let alone "far", you do not have an accepted offer, so you are still no where at all.
They are not playing games, 250 is the price. |
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goz1111
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My bet is if your agent goes back to their agent and ask some questions you will find that the lender never gave an official exact number that they would do the short, most likely the seller and the seller agent set the asking price of 200K
In reality since the asking price and your offer price are below the loan amount the bank is under no legal obligation to take an offer below the loan amount, so they are completely within their right to state the lowest amount they are willing to right off, just because the seller listed it at 200K does not mean the bank must take that listing offer
Many sellers and agents are under the mistaken belief if they can bring to the lender a willing able buyer at a number below the loan amount that the lender will just take that offer, which seems to be your case, now you know at least the ball park the bank is willing to go, remember the banks also have insurance to compensate some of the lost loan funds |
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glenn
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The bank is not the owner and did not list the home for sale. They are not really "countering back" The bank is just telling the owner they will not write off as much of the sellers mortgage as the seller thought they would. So the list price was not really valid. Not really anyone's fault. When the listing says it is a short sale they are warning you that things like this may happen. Also you will not likely get any repairs agreed to. |
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src50
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Yes, they can counter offer. You can decline. |
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afiesha s
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Hey John, to get the ideal solution, I highly recommend this website. Good luck!
http://www.shortsalecomplete.com/?utm_source=blog&utm_medium=blog&utm_campaign=shortsalecomplete |
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Angie S
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I just looked at a house that was short sale, and my realtor explained it to me like this. The owner (not the bank) actually makes the listing price, based on what they think it is worth. After a party (you) puts in an offer, the bank hires someone to do an appraisal, and it can quite possibly be worth more than what the owner originally listed it as. Therefore yes they can come back and say this house is worth more, and ask for more money for it. It made sense to me the way he explained it, I just don't get why the bank doesn't set the listing price themselves from the beginning? |
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golferwhoworks
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bobby is right--if there are several offers then they want to start a bidding war and hopefuly not loose as much. They want to be made whole if at all possible |
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bobby d
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Sure .. they want as much as they can get |
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godged
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Not unethical or illegal. Were you unethical or doing something illegal by offering more than list price?
This happens often with foreclosures. Apparently one of the other offers was somewhere around $250,000, so the lender most likely made a $250,000 counter offer to all the offers.
Of course, the lender wants to make as much as possible on the sale of this home, and if you want the house, you are going to have to pay $250,000. |
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